Risk comes from not knowing what you are doing and not having the ability to control the situation when things get out of hand.

Saturday, October 10, 2009

Algorithmic Trading

"The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather a lack in will" - Vince Lombardi.

Went to attend a talk on Algorithmic Trading organised by AFACT last night. I am glad that Mr. Alan Donoghue from Nyenburgh, an algorithmic trading firm is willing to share his expertise with us. Together with vendors RTS and TT, we were given a brief education on Algo trading and how we too can be Algo traders.

Since we can't beat them, join them!

Algos have been accused of wrecking havoc to the profitability of many scalpers recently as more firms are jumping on the bandwagon to have a piece of the cake. Many traders felt the Algos are a threat to their livelihood and responsible for their dismal performance.

These algos are in fact narrowing down the spreads whenever there is any inefficiency in the pricing taking away the yum trades from the scalpers. They are providing more liquidity into the market and a boom to retail customers.

Non trending market condition in a narrow range with dropping volume is always difficult for traders to make money. It has got nothing to do with algos. Traders need to keep changing their strategies to deal with the different market conditions.

Scalpers are losing their edge in term of execution speed to the algos but with more algos, they will be fighting each other too and I believe not all algos make money.Education has made investors more savy and traders smarter thus making competition really tough.

There is no level playing field in this world, we just need to live with it, come to term with it, be more imaginative and more innovative in finding our edge.

"You cannot depend on your eyes when your imagination is out of focus" - Mark Twain.

I have many friends who are trading from home, definitely losing out in term of speed, yet some of them are making a comfortable living. I salute them.